Battle expected over California whey value

CDFA hearing on whey value in its pricing formula for milk heading to cheese vats won't be cut and dried, despite a negotiated agreement between producers and chees manufacturers, represented by the Dairy Institute of California. The hearing is set for Thursday, and CDFA will have 62 days after the close of the hearing to make a decision.

A Sept. 12 hearing by the California Department of Food and Agriculture on the value of whey in the minimum pricing formula for milk going into cheese, Class 4b, doesn’t look to be as straightforward as milk producers might have hoped.

The hearing was called following a negotiated agreement between dairymen and cheese manufactures, represented by the Dairy Institute of California, to bring the value of whey in California’s pricing formula more in line with the whey value in Class III formulas in federal milk marketing orders.

The agreement was at the behest of Assemblyman Richard Pan, who introduced legislation encouraging CDFA to hold a hearing on the matter.

Following the agreement – in which the Dairy Institute supported a hearing, a temporary price increase to 4b and a permanent increase to the cap on whey value if economic conditions warranted – four producer organizations petitioned CDFA Secretary Karen Ross to hold a hearing to implement the agreed-upon changes.

Producer groups are cautiously hopeful that the negotiated agreement might seal the deal on price relief after repeated petitions to CDFA over the last three years brought disappointing results.

But the Institute isn’t of the same sentiment and isn’t even clear where that deal stands, according to Rachel Kaldor, the Institute’s executive director.

In a letter signed by Joseph Lang of the Sacramento government relations firm of Lang, Hansen, O’Malley & Miller, the Dairy Institute said understanding the intent of Pan’s legislation, it would support CDFA hearings resulting in the following: • The current emergency price relief is extended through June 2014 provided that no more than 46 cents per hundredweight be assigned to Class 4b milk. • An increase in the current cap for the whey scale factor from 75 cents to $1 per hundredweight.

The results of the proposal would generate a total of $110 million for California producers in the year immediately following implementation, said Michael Marsh, CEO of Western United Dairymen.

The Institute maintains that “if economic conditions warrant” any changes is a pivotal distinction in the negotiated agreement and in the discussion, Kaldor said.

“We didn’t write a blank check, we entered into a good-faith agreement,” she said.

Looking at the loss of producers, cows and milk production in the state and the reality that milk prices aren’t keeping pace with cost of production, it’s obvious economic conditions warrant and increase in the value of whey, Marsh said.

“Dairy producers are still going out of business and are still upside down. I’m not sure it would be in good faith to testify to something else,” he said.

In addition, the waters have been muddied regarding the agreement, which was facilitated by Pan in concert with his legislation, on the issue, AB 1038, sponsored by producers, Kaldor said.

After the Institute agreed to the deal, language in Pan’s bill encouraging CDFA to hold a hearing on the issue was stripped from the bill.

Producers walked away from all aspects of the agreement when they stripped that language out of the bill, Kaldor said.

Producers then petitioned CDFA on their own and did not ask the Institute to join in that petition, she said.

“I don’t think that’s indicative of an agreement,” she said.

Marsh counters, saying producers didn’t strip the language from the bill, and the deal stated the hearing and implementation was in the hands of CDFA.

“The Legislature is of the understanding the deal would be done at CDFA” to the extent economic conditions warrant, he said.

The wording of the deal was never in the bill, and producer organizations did ask the Institute to sign the petition to CDFA and it declined, he said.

“Conditions have warranted the hearing. Now it’s a matter of the Institute supporting the deal they negotiated with Dr. Pan,” Marsh said.

The hearing is set for 8 a.m. at the CDFA auditorium in Sacramento and could extend into Friday. Secretary Ross will have 62 days after the close of the hearing to issue a decision.